Topic: Reconciliations

Topic: Reconciliations. Reconciliation of bank statements with cash journals in order to prepare bank reconciliation statements..

nunmn I.

BANK RECONCILIATION STATEMENT. This is a statement where we reconcile what we have in our books with that in the bank statement. The balance in the bank account in the business’ general ledger should be the same as the balance on the bank statement received from the bank. If not these are not the same, they need to be reconciled..

Note:. Since the bank keeps the cash of the business, it considers the business to be a creditor while the business considers the bank to be a debtor . As such, whenever the business receives and deposits cash, the bank account is debited while the bank statement will show the same deposits as a credit entry. The opposite applies to payment, i.e. the bank account of the business will be credited while the same payment will be shown as a debit on the bank statement..

A summary of possible DIFFERENCES between the CRJ/CPJ and the Bank Statement.

Reconciling the bank balance in the ledger with the balance in the bank statement..

How?. Items that are still outstanding from the previous month’s bank reconciliation statement: Record these items in this month’s bank reconciliation statement The exception may be made for outstanding cheques from last month that are stale or have to be cancelled for various reasons. Deposit made by the business not yet credited on the bank statement This deposit must be entered in the Bank reconciliation statement. Cheques issued by the business that did not appear in the bank statement. These cheques may not have been presented by the respective payees to the bank for payment. They will be recorded in the bank reconciliation statement.

Cheques issued that must be cancelled including stale cheques The cancellation entry for a cheque issued is made in the Cash receipts journal. The entry made will be identical to the original entry in the Cash payment journal. Direct deposit made to the business account The deposits must be recorded in the Cash receipts journal. Interest on overdraft. The interest must be recorded in the Cash payment journal . it must not be included with the bank charges as it is a finance cost.

Bank charges. Charges levied by the bank, shown in the debit column of the bank statement, should be added up and recorded in the cash payment journal as one entry. Stop orders and debit orders These are payment made regularly by the bank on behalf of a client and shown on the debit side of the bank statement. These items must be recorded in the cash payment journal. Dishonoured cheques Cheques previously deposited by the business may be dishonoured by the bank and will be found on the debit side of the bank statement . the entry for this must be made in the cash payment journal..

Errors made by the business Errors made by the business in the cash journal must be corrected in the journal. The most common types of errors is made when an incorrect amount is reflected in the cash payment journal for a cheque issued by the business If the amount recorded in the CPJ is more than is should be , then a corrective entry for the differences between the two amounts is made in the CRJ If the amount recorded in the CPJ is less than it should be then a corrective entry for the difference between the two amounts is made in the CPJ Errors made the bank Errors made by the bank will be corrected by the bank in the next month’s bank statement. However, errors made by the bank are recorded in the Bank reconciliation statement.

Practical example : Required: Complete the Cash receipts journal and Cash payment journal of Rwanda furniture for October 2019 after taking the information provided into account. Post to the Bank account in the General Ledger of Rwanda furniture's Balance the account. Prepare the Bank Reconciliation Statement as at 31 October 2019. Bank Reconciliation Statement as at 31 October 2019 The bank column of each of the cash journal showed the following totals before the October 2019 bank statement was received: Cash Receipts Journal 87 600 Cash Payment Journal 87 890.

A comparison of the cash journals of Rwanda Furniture's for October 2019 and Bank Reconciliation Statement for September 2019 with the bank statement for October 2019 revealed the following:.

Entries in the cash journals that did not appear in the bank statement:.

Bank Reconciliation. 1.. Cash receipts Journal Details fol Bank Totals b/f 87 600 Interest on fixed deposit 500 Rent income 900 Donation(Cheque cancelled) 1200 Total 90 200.

Bank 01 Oct Balance b/d 9 700 31 Oct Total Payments 90 800 31 Oct Total receipts 90 200 Balance c/d 9 100 99 900 99 900 01 Nov Balance b/d 9 100.

Bank Reconciliation Statement Debit Credit DR balance as per bank statement 9 920 CR outstanding deposit 25 600 DR outstanding cheques: Cheque no.750 3 170 Cheque no.755 1 040 Cheque no.690 3000 DR balance as per bank account 9 100 25 600 25 600.